New ‘e-bankruptcy’ process comes into force

News Article

From April 2016, the process for applying for bankruptcy undergoes a major change which, on the face of it, should lead to a simplification of procedures.

Previously all bankruptcy applications had to be submitted to the court and considered by a judge, but with effect from 6th April, the application process for people wishing to make themselves bankrupt has moved out of the courts and online.

Bankruptcy applications will now need to be completed and submitted online rather than using a paper form and there is no longer a requirement to attend court. Instead, the submitted application is electronically forwarded to a government official employed by the Insolvency Service, known as an adjudicator, who then makes a decision about the application.

Andrew Skinner, a partner and head of Debt, Possession and Insolvency at Palmers, said: “The simplification of the bankruptcy process is intended to keep pace with the modern way of working. Tax returns and other financial reporting requirements are submitted online so it follows that bankruptcy applications should also be completed online.

“However, I am concerned that this could lead to small business owners and individuals taking a do-it-yourself approach, without considering the wider repercussions of declaring bankruptcy which should not be entered into lightly due to the many legal and commercial implications involved.”

“The government bankruptcy service has, at the same time as launching the online application process, reduced the overall fees for bankruptcy from £705 to £655 and for the first time it is allowing applicants to pay online and in instalments which is a welcome change as any reduction in costs, no matter how small, is helpful for anyone who is facing economic hardship.

“Any paper applications started before 05 April 2016 which have yet to be submitted to the court, will need to be started again using the new online application, whilst any submitted applications, where a fee has already been paid, will continue to be dealt with in court.

“The process of making a third party bankrupt remains unchanged. A minimum of £5,000 needs to be owed in order to present a petition, applying for assets to be taken and sold to pay outstanding debts. This aspect of insolvency law remains complex and most businesses considering this route to consolidate their balance sheets, would be advised to seek expert legal help.”

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